The Argentine wine boom has been an impressive story. A growing demand for wines at higher price points saw Argentine exports take off from the early 2000s. However, in 2012, export volumes of Argentine still bottled wine began to contract, unveiling the challenges the sector is currently facing.

Details

According to Rabobank’s Wine Quarterly Q3 report, Argentina must find ways to regain competitiveness, while maintaining the country’s brand image, through market diversification and innovation to drive growth in the domestic market. “Wine production costs have increased as much as 100% over the last four years”, notes Rabobank analyst Valeria Mutis. “Movements in the exchange rate are also far from being on par with inflation rates. While the industry has little or no capacity to alter the current economic context, there are a number of strategic steps that it can undergo to improve its competitive position”.

In 2012, Argentina accounted for more than 3% of world wine exports, heavily weighted towards the US. An expanding community, the US Hispanic segment is a natural niche market for South American and Spanish wine producers. Additionally, opportunity exists in the Mexican market where alcohol consumption is relatively high and a burgeoning middle class exists. According to Rabobank, diversifying to these ‘natural’ markets presents potential for continued long-term growth. Elsewhere, exports to Canada and China have recorded strong pricing gains suggesting a growing market appreciation and an attractive target for future promotional efforts.

Argentine bottled wine can no longer compete profitably in the low-end market segments. According to Rabobank, the industry will need to adapt its wine offering without eroding its strong brand by identifying and adapting to new consumption trends. Though their preferences diverge from the typical wine consumer, the millennial generation are driving sector growth and brands that have successfully targeted this consumer segment have seen significant sales growth. Argentina’s domestic market, too, presents an opportunity as consumption of higher end wines has gradually increased. If wine manufacturers can continue to convince the domestic market to trade up in their wine selections, a growing amount of ‘exportable’ wines could be directed to the domestic market.

Internationally, bulk wine pricing continues to fall across many regions and varietals, with Chardonnay and generic white wine pricingremaining more stable than many others in recent months. Cabernet Sauvignon and other red varietals have seen some of the most notable pricing declines.

“In the current challenging scenario”, said Rabobank analyst Marc Soccio. “all eyes remain fixed on the US Federal Reserve as anticipation grows that it will pare back the level of monetary stimulus in the economy before the end of the year”.

·The report/presentation attached is sent specifically to enable journalists to do their work, i.e. as the basis for an article or news report, or as preparation for a telephone or personal interview with a content expert. In line with good journalistic practice, a reference to the source would be appreciated

·Please note that it is expressly forbidden to forward the attached report/presentation in any form to third parties, or to publish this report either partially or entirely on a website.

·Rabobank has recently updated the distribution lists for Food & Agribusiness Research reports. If you have no interest in further receiving this information, please let us know and we will remove your email address promptly.

SOCIAL MEDIA

Spokesperson

MHP Communications

Jonathan Goodstone / Naomi Lane
+44 (0)20 3128 8184 / 8204

About Rabobank Food & Agribusiness Research

About Rabobank Group and Rabobank Food & Agribusiness Research and Advisory

Rabobank is a Netherlands based, international financial services provider operating on the basis of cooperative principles. It offers retail banking, wholesale banking, private banking, leasing and real estate services. As a cooperative bank, Rabobank puts customers’ interests first in its services. Rabobank is committed to being a leading customer-focused cooperative bank in the Netherlands and a leading food and agri bank worldwide with assets totalling at 670 billion euro. The organisation has approximately 52,000 employees worldwide and operates in 40 countries.

Rabobank is the unrivalled market leader in the agricultural sector in the Netherlands. Its international strategy Banking for Food is aimed at increasing the availability of food, improving the access to food, promoting healthy nutrition and enhancing the stability of the food industry through its international activities.

Rabobank Food & Agribusiness Research and Advisory (FAR) is Rabobank’s global F&A Knowledge Provider. FAR comprises a global team of more than 80 analysts that continuously accumulates knowledge in major F&A sectors, issues and trends.